BEIJING, June 28 -- Economists at a financial forum in Ningbo city of Zhejiang Province say China's housing prices are still high, and that the warming up of the property market has mainly been due to capital influx.
An economist and former vice chairman of the standing committee of the National People's Congress, Cheng Siwei, says China's financial system has suffered less from the global financial crisis than those in developed countries. He pointed out that Chinese banks lack innovation so they have relatively low risk exposure. He added that the whole banking system has enough liquidity.
Cheng Siwei mentioned that bank credit extensions in the first quarter represented about 90 percent of the annual target. Some of this capital has been channeled into stock and real estate, so the markets are seeing a temporary rebound. He also said that despite the real demand, some are buying property for investments, causing housing prices to surge. He also warned of the negative impact of fast growing bank loans.
Also at the forum, Gao Qinghui, an economist at China Information Center, says recovering property prices in the past few weeks indicate a bubble is forming in the sector. He pointed out that the property market is still facing excess supply due to overbuilding over the past few years. He added that much of the recent strong demand has stemmed from investors buying property as a hedge against rising inflation. Gao said the new government initiative to increase the supply of subsidized housing will also put pressure on the commercial housing market.